IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v25y2000i3p519-539.html
   My bibliography  Save this article

Invariance, price indices and estimation in almost ideal demand systems

Author

Listed:
  • Adolf Buse

    (Department of Economics, University of Alberta, Edmonton AB, Canada T6G 2H4)

  • Wing H Chan

    (Department of Economics, University of Alberta, Edmonton AB, Canada T6G 2H4)

Abstract

Two issues are addressed in this paper. First, we explore the issue of price index invariance in the linearized Almost Ideal demand system. We establish that the Stone index, which lacks invariance, and the recently proposed invariant Laspeyres, Paasche and Tornqvist indices all generate biased and inconsistent estimators. Monte Carlo evidence shows that invariance does not necessarily lead to better estimates of price and income elasticities insofar as the Stone and Paasche indices are unambiguously inferior to the Laspeyres and Tornqvist indices, especially if prices are not strongly positively correlated. Second, we examine the merits of the widely used conditional ML estimator of the non-linear Almost Ideal system in which a prior value is chosen for the "subsistence" parameter. We find that the bias and trace mean square error increases induced by conditional estimation are modest. The choice between the linearized and the non-linear models favors the latter although in some cases linear methods are as good as non-linear.

Suggested Citation

  • Adolf Buse & Wing H Chan, 2000. "Invariance, price indices and estimation in almost ideal demand systems," Empirical Economics, Springer, vol. 25(3), pages 519-539.
    • Handle: RePEc:spr:empeco:v:25:y:2000:i:3:p:519-539
    Note: Received: January 1999 / Final Version Received: March 2000
    as

    Download full text from publisher

    File URL: http://link.springer.de/link/service/journals/00181/papers/0025003/00250519.pdf
    Download Restriction: Access to the full text of the articles in this series is restricted
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. West, Sarah E. & Williams, R.C.Roberton III, 2004. "Estimates from a consumer demand system: implications for the incidence of environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 535-558, May.
    2. Eugene Jones & Cuma Akbay & Brian Roe & Wen S. Chern, 2003. "Analyses of consumers' dietary behavior: An application of the AIDS model to supermarket scanner data," Agribusiness, John Wiley & Sons, Ltd., vol. 19(2), pages 203-221.
    3. Dhar, Tirtha & Chavas, Jean-Paul & Cotterill, Ronald W. & Gould, Brian W., 2002. "An Econometric Analysis of Brand Level Strategic Pricing Between Coca Cola and Pepsi Inc," Working Papers 201553, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    4. Dong, Diansheng & Gould, Brian W. & Kaiser, Harry M., 2002. "The Structure Of Food Demand In Mexico: An Application Of The Amemiya-Tobin Approach To The Estimation Of A Censored System," 2002 Annual meeting, July 28-31, Long Beach, CA 19830, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Asche, Frank & Guttormsen, Atle G. & Kristofersson, Dadi & Roheim, Cathy A., 2005. "Import Demand Estimation and the Generalized Composite Commodity Theorem," 2005 Annual meeting, July 24-27, Providence, RI 19432, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Ken-ichi Mizobuchi & Hisashi Tanizaki, 2014. "On estimation of almost ideal demand system using moving blocks bootstrap and pairs bootstrap methods," Empirical Economics, Springer, vol. 47(4), pages 1221-1250, December.
    7. Wildner, Susanne, 2001. "Quantifizierung der Preis– und Ausgabenelastizitäten für Nahrungsmittel in Deutschland: Schätzung eines LA/AIDS," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 50(05), pages 1-11.
    8. Lin, Biing-Hwan & Dong, Diansheng & Carlson, Andrea & Rahkovsky, Ilya, 2017. "Potential dietary outcomes of changing relative prices of healthy and less healthy foods: The case of ready-to-eat breakfast cereals," Food Policy, Elsevier, vol. 68(C), pages 77-88.
    9. Dong, Diansheng & Kaiser, Harry M. & Myrland, Oystein, 2003. "Estimation Of Censored La/Aids Model With Endogenous Unit Values," Research Bulletins 122119, Cornell University, Department of Applied Economics and Management.
    10. Zakary Rodrigue Diakit'e, 2024. "Estimating Demand for Lamb, Beef, Pork, and Poultry in Canada," Papers 2402.13439, arXiv.org.
    11. repec:ebl:ecbull:v:3:y:2008:i:14:p:1-10 is not listed on IDEAS
    12. Renata BENDA PROKEINOVA & Martina HANOVA, 2016. "Modelling consumer's behaviour of the meat consumption in Slovakia," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 62(5), pages 235-245.
    13. Manami Ogura, 2008. "The examination of the validity of the Divisia price index for the almost ideal demand system model: Some Monte Carlo results," Economics Bulletin, AccessEcon, vol. 3(14), pages 1-10.
    14. Catherine Durham & James Eales, 2010. "Demand elasticities for fresh fruit at the retail level," Applied Economics, Taylor & Francis Journals, vol. 42(11), pages 1345-1354.
    15. Diakité, Zakary, 2023. "Estimating Demand for Lamb, Beef, Pork, and Poultry in Canada," MPRA Paper 120115, University Library of Munich, Germany.
    16. Cuma Akbay, 2007. "Urban Households’ Cooking Oil and Fat Consumption Patterns in Turkey: Quality Vs. Quantity," Quality & Quantity: International Journal of Methodology, Springer, vol. 41(6), pages 851-867, December.
    17. Astrid Jonas & Jutta Roosen, 2008. "Demand for milk labels in Germany: organic milk, conventional brands, and retail labels," Agribusiness, John Wiley & Sons, Ltd., vol. 24(2), pages 192-206.

    More about this item

    Keywords

    AIDS model · invariance · price indices · conditional estimation · Monte Carlo;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:25:y:2000:i:3:p:519-539. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.